Examining 3 likely Supreme Court outcomes

It’s finally June. That means—if the Supreme Court delivers on its promise—that we’ll soon know the fate of the Patient Protection and Affordable Care Act.

Though, analysts at Moody’s Investor Services point out, “we will likely have as many questions as answers” after the ruling. After all, what really happens after the ruling comes out will also be dependent on the outcome of the November elections.

Since the Supreme Court heard oral arguments on the constitutionality of PPACA March 26-28, there’s been constant speculation on which way the ruling would go.

And though there are more possible outcomes than three—and more complicated ones—the following are a fair bet on what will happen—or at least what people think will happen.

Uphold the law as is

There’s good and bad things here.

As least according to Moody’s Investors Service, if the PPACA is upheld, it could have negative credit implications for health insurers even though their coverage base will increase.

If the PPACA stands, health insurers will face the regulations and restrictions mapped out in the law, including the medical loss ratio and aggressive reviews of rate increases. In addition, Moody’s analysts say employers may eliminate their health insurance programs in favor the health insurance exchanges and individual mandate, thus putting more pressure on health insurers.

Plus, there’s the whole issue with cost. Research from global insurance broker Willis Group Holdings finds a handful of employers say their costs have risen in excess of 5 percent since 2010 in accordance with—and anticipation of—reform. And employees are helping bear that extra cost.

Plus, despite what President Obama promised about keeping the insurance you like, a third of employers are projected to reduce coverage to the lowest-cost packages that will avoid the “pay-or-play” penalty and rely more on wellness programs in order to curb costs.

Still, there has been some good come out of the PPACA. For one, more kids and young adults have access to care. Health reform not only provides more coverage to young adults, but ensures they have coverage longer. The HHS says 2.5 million more young people were insured in June 2011 than were insured in September 2010 because of the provision of health reform that allowed people up to age 26 to stay on their parents’ plan.

And it’s put attention on the country’s health care crisis and encouraged insurers and health care providers to work together to try to hold down costs, analysts say.

But even if the Supreme Court rules that the PPACA stands—don’t expect that to be the end. Leaders of the U.S. House are planning more votes on bills to repeal parts of the federal health care law.

And with the election coming up in just a few short months, anything can happen. Republican nominee Mitt Romney has said he would work on repealing the law his first day of office.

Kill the individual mandate and keep the rest

Though critics of the PPACA have said the entire law must fall if the individual mandate falls—since the law contains no severability provision calling for the rest of the act to remain intact if one part is tossed out—this potential outcome is one we keep hearing time and time again.

By far, the individual mandate has been the most heavily debated provision of the entire law. Even proponents of the law have said they thought requiring people to buy health insurance was unconstitutional. A Kaiser Family Foundation poll finds seven in ten Americans oppose this provision, including 53 percent of the public who say they hold “very unfavorable” views of it. Overall, half of Americans (51 percent) believe the court should rule the mandate unconstitutional.

As far as it being the linchpin of the bill, Americans don’t believe it. Overall, the public doesn’t see the individual mandate as the anchor of the entire law. A good majority (62 percent) think other parts of the law will still be implemented if the court rules the mandate unconstitutional, compared to 28 percent who say such a ruling will scuttle the whole effort.

Still, Moody analysts say they think either a ruling upholding all of PPACA or a ruling upholding all parts but the individual mandate could hurt insurers, because the cost of the new taxes, new coverage requirements and new limits on profitability that health insurers would face would far outweigh any benefits the insurers could get from enforcement of coverage mandates.

The penalties that would be imposed in connection with the individual and employer mandates are simply too weak to cause many individuals or employers to maintain health coverage, the analysts say. So instead of flocking to buy coverage to avoid penalties, many individuals and employers likely will respond to rising coverage prices by paying the penalties and going without coverage, Moody analysts predict.

Throw it all out

Again, there’s good and bad news with this ruling.

If the entire health care law is thrown out, this would be seen as a credit positive for health insurers, according the Moody’s report. If the PPACA stands, health insurers will face the regulations and restrictions mapped out in the law, including the medical loss ratio and aggressive reviews of rate increases. Additionally, Moody's analysts say employers may eliminate their health insurance programs in favor of the health insurance exchanges and individual mandate, thus putting more pressure on health insurers.

But with all the health care flaws that the PPACA pointed out—along with the unsustainable rising health care costs—health reform will not be going away, even if this particular law does.

Many states are already well under way with implementing PPACA, and if PPACA struck down, “we may eventually see PPACA replaced by a number of state health reform laws that may be complicated and costly for insurers to deal with,” the analysts say.

It would be tricky for some provisions, especially the popular one allowing young adults to stay on their parents’ insurance until age 26. This has already added nearly 2.5 million people to the coverage rolls, at no cost to taxpayers.

The others

There are other options—the Court could kill the part of the law that requires insurance companies to cover people regardless of medical problems, throw out the expansion of the Medicaid program or decide that a ruling is too premature—which is probably the biggest wild card of all.

But no matter what the ruling is, as mentioned, the presidential election in November can change everything again. And despite what does happen with the future of the PPACA, health care has, and will be, changed.

“Employers continue to develop their benefits strategies, and no matter what the outcome of the Supreme Court review, costs will continue to force employers to try new designs and solutions,” says Donna Joseph, CEO of Rhodes-Joseph & Tobiason Advisors. “Employers need to make these changes strategically (not knee jerk), and their actions to date have been toward that goal.”

The parent company of United Airlines and Continental Airlines said Wednesday that Continental has reached a labor agreement with representatives of some 7,200 non-union employees who work as reservation agents and in other passenger-service roles.